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March 31, 2021

President Biden to announce $2.0 trillion in new stimulus

Canada March GDP is better than expected; ADP jobs miss forecast

EURUSD hits  5-month low, US dollar opens mixed to lower

USDCAD open (6:00 am ET)  1.2597-01,  Overnight Range 1.2593-1.2629,  Close 1.2629

FX at a Glance 

Source: IFXA Ltd/RP

FX Recap and Outlook

US Democrats will be giggling like Elmo when President Biden outlines his latest multi-trillion dollar stimulus initiative.   His speech about the upcoming “Build Back Better” plan is at 4: 20 pm  ET.  Reportedly, he plans to spend $2.0 to $4.0 trillion to rebuild infrastructure, internet services, and R & D, offset by a $3.0 tax hike on corporates and wealthy individuals.

Statistics Canada reported GDP rose 0.7% m/m in January compared to the forecast of a 0.5% m/m gain.  They noted that it was the ninth consecutive increase but even so, GDP remains 3.0% below the pre-pandemic level.  Wholesale Trade jumped 3.9% compared to a 1.5% decline in December.  USDCAD ticked slightly lower on the news.

The ADP Employment report showed new jobs increased 517,000 from February to March.  It is an impressive gain, but it missed the forecast for a 550,000 increase.  The news may put a damper on expectations that Friday’s Non-farm payrolls report will have an upside surprise to the 639,000 forecast.

FX markets were choppy overnight, as quarter and month-end portfolio rebalancing flows saw US dollar selling against the Canadian dollar and British pound.

EURUSD  is in the middle of its 1.1705-1.1747  overnight range.  The single currency is consolidating losses from the EU economic underperformance against the US, and from ongoing coronavirus issues.  ECB President Christine Lagarde reiterated her dovish outlook and said it would be “quite some time” before the ECB would consider raising rates.  Traders ignored  a 0.9% m/m rise in CPI rose 0.9% in March.  The EURUSD technicals are bearish while prices are below 1.1760, looking for a break of 1.1700 to test 1.1650.

GBPUSD jumped to 1.3794 from 1.3718 in part because of month and quarter end GBP demand.  Prices continue to be supported by recent upbeat comments from Bank of England officials, and modestly better economic data.  The short-term technicals are bullish above 1.3720 looking for a break of 1.3850 to extend gains to 1.4000.

USDJPY  finished its fiscal year-end by flirting with, but not touching 111.00.  Prices rallied from 110.28 to 110.954 from 110.28  despite US 10-year Treasury yields retreating from  the recent peak.

AUDUSD was underpinned by better than expected domestic and Chinese data.  Australia Building Permits rose 21.9% m/m in February, fully reversing January’s 19.4% decline.  China March Manufacturing PMI  was 51.9 compared to 50.6 in February.  Non-Manufacturing PMI  jumped to 56.3 from 51.4 in  February.  NZDUSD tracked AUDUSD moves.

USDCAD  is consolidating recent gains in a 1.2595-1.2629  range.  Bullish technicals are providing support while with month-end US dollar selling pressures and oil prices are helping to cap the topside.  The currency pair’s direction will be determined by the market reaction to Biden’s latest stimulus plan.

The US releases Chicago PMI (forecast 60.7) and pending home sales.

USDCAD Technicals: The intraday technicals are bullish above 1.2540 with yesterday’s break above 1.2610 snapping the downtrend line from last March and targeting 1.2750 on a breeak above 1.2650 for today, USDCAD support is 1.2580 and 1.2540. Resistance is 1.2630 and 1.2650 today’s Range 1.2570-1.2630

Chart: USDCAD daily

Source:  Saxo Bank

FX open (6:00 am EDT) High, Low, and previous close

Source:  Saxo Bank